South Carolina Personal Lines Practice Exam

What are the two types of compensatory damages in insurance?

1. Special and punitive

2. General and nominal

3. Special and general

4. Direct and indirect

The correct answer is: Special and general

Compensatory damages in the context of insurance are categorized into two primary types: special damages and general damages. Special damages refer to monetary compensation for specific, quantifiable losses incurred as a result of an incident, such as medical expenses, lost wages, or property damage. These damages can be documented and calculated based on actual financial loss. General damages, on the other hand, compensate for non-monetary losses that are more subjective and harder to quantify. These may include compensation for pain and suffering, emotional distress, or loss of enjoyment of life, which do not have easily measurable economic values. Understanding this distinction is crucial for both insurance professionals and policyholders, as it helps in determining the appropriate type of coverage needed and the potential financial implications of an insured event. The other types mentioned—punitive damages and nominal damages—serve different purposes in legal contexts and do not directly fall under the compensatory damages category as understood in insurance.